Canada’s oil patch cuts back climate efforts

Canadian oil producers will have a hard time convincing investors of their role in a future lower carbon economy if their commitment to green initiatives is wavering. (Reuters)
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Updated 15 June 2020

Canada’s oil patch cuts back climate efforts

  • Top producers cut $1.32 billion in planned spending on green initiatives

WINNIPEG: Canadian oil sands companies have shelved nearly C$2 billion in green initiatives in a cost-cutting drive to weather the coronavirus pandemic, a reversal in some of their commitments to reduce emissions and clean up their dirty oil image.

International oil firms left Canada in droves in recent years due to the high costs to turn a profit in the sector. Some investors and banks, meanwhile, halted financing in part to pressure the world’s fourth-largest crude producer to reduce the environmental impact of oil-sands production.

This year, top producers Suncor Energy, Canadian Natural Resources and Cenovus Energy have cut a combined C$1.8 billion ($1.32 billion) in planned spending on green initiatives as losses mount due to economic lockdowns that have hammered oil demand.

“This has strengthened our view on the matter, that our decision that we took (to block oil sands) was correct,” said Jeanett Bergan, KLP’s head of responsible investments.

KLP, Norway’s largest pension fund, exited oil sands investments last year, while the country’s $1 trillion wealth fund in May blacklisted Suncor and other large producers for producing excessive greenhouse gas emissions.

The Canadian industry has the highest upstream emissions intensity among major world oil and gas producers, at 39 kilograms per barrel of oil equivalent, more than triple that of the US, consultancy Rystad Energy said in May.

The picture in Canada contrasts with Europe, where the biggest oil and gas companies have diverted a larger share of their cash to green energy, even through the outbreak.

The oil sands industry is more carbon-intensive than other forms of crude production, and faces more intense pressure from investors to limit emissions. Canadian oil producers will have a harder time convincing investors and environmentalists of their role in a future lower carbon economy if their commitment to green initiatives is wavering.

Canada’s oil firms have invested in recent years to reduce their emissions intensity. But Western Canada’s overall emissions increased 14 percent from 2005 to 2018, as oil output doubled.

Suncor, which made most of the cuts, shelved a C$300 million wind power project and a C$1.4-billion cogeneration plan, which would replace coke-fired boilers with natural gas units at its base operations, reducing carbon emissions and other pollutants.

Alberta, heart of most of Canada’s production, reduced environmental monitoring requirements temporarily, saying it was necessary to comply with health orders regarding the pandemic. The suspended types of monitoring included certain water quality tests and some monitoring of soil and wildlife.

Alberta’s move is worrisome, said Jamie Bonham, director of corporate engagement at NEI Investments, a firm focused on responsible investing, which holds stakes in the sector to advocate for green improvements.

“The province is simultaneously opening up the economy — you can go to a barber, get a massage or sit in a restaurant — but you can’t take an environmental reading at a wellsite?” Bonham said.

The pause is only for “short-term relief,” said Kavi Bal, spokesman for the province’s energy minister. He noted that a major commercial carbon capture project began operations this month.

The federal government has used pandemic aid to launch two new green initiatives — cleaning up abandoned wells and loans to help companies reduce methane emissions.

Such steps, however, are too little and too late to draw back many investors, banks and insurers that shunned the industry in recent years, according to a Reuters survey.


Oil climbs on positive China data, hopes for US stimulus package

Updated 11 August 2020

Oil climbs on positive China data, hopes for US stimulus package

  • Iraq to deepen supply cuts in August and September; China’s factory deflation slows in July

LONDON: Oil rose on Monday, supported by an improvement in Chinese factory data, rising energy demand and hopes for an agreement in the United States on more coronavirus-related economic stimulus.

Brent crude rose 75 cents, or 1.7. percent, to $45.15 a barrel, and West Texas Intermediate (WTI) US crude was up 94 cents, or 2.3 percent, to $41.16 a barrel.

Saudi Arabian Aramco CEO Amin Nasser said on Sunday that he sees oil demand rebounding in Asia as economies gradually open up.

China’s factory deflation eased in July, driven by a rise in global oil prices and as industrial activity climbed back toward pre-coronavirus levels, adding to signs of recovery in the world’s second-largest economy.

“With oil demand still slowly grinding higher, and oil supply in check due to the OPEC+ production cut deal and prices too low to incentivise strong production growth in the United States, the oil market remains undersupplied,” UBS analyst Giovanni Staunovo said.

Iraq said on Friday it would cut its oil output by a further 400,000 barrels per day in August and September to compensate for its overproduction in the past three months.

The move would help it comply with its share of cuts by the Organization of the Petroleum Exporting Countries and allies, a grouping known as OPEC+.

“This would send out a strong signal to the oil market on various levels. That said, this would also require the international companies operating in Iraq to join in with the cuts,” Commerzbank analyst Eugen Weinberg said.

Prices also found some support after US President Donald Trump said US House Speaker Nancy Pelosi and Chuck Schumer, the top Democrat in the Senate, wanted to meet with him to make a deal on coronavirus-related economic relief.

The talks between Democrats and members of Republican Trump’s administration broke down last week.

“The longer this drags on, the worse it is for the demand scenario,” said Michael McCarthy, market strategist at CMC Markets and Stockbroking.

However, uncertainty over rising tensions between the United States and China put some pressure on prices. Trump signed two executive orders banning WeChat and TikTok in 45 days’ time while announcing sanctions on Chinese and Hong Kong officials.

Markets will now keep an eye on a China-US meeting on trade scheduled for this weekend.